Coming out of the last recession, Ford Motor Company (NYSE:F) was very good to its investors. Starting at a low below $2 in the darkest days of the economic crisis, Ford found its sales surging as buyers returned to showrooms. Its stock price quickly followed.
But over the last few years, Ford's stock has been on a slow downhill slide. Investors concerned about the peaking U.S. new-car market, and about Ford's preparedness for the high-tech changes coming to the industry, have been looking elsewhere for returns:
That chart isn't exactly encouraging, though you'll note that Ford has seen a little bit of a lift in the last month or so. I may not be the only one thinking that Ford stock is looking more and more like an overlooked bargain. Ford seems reenergized under new CEO Jim Hackett, and is already making the changes needed to get its bottom line back on a growth path -- now and in the future.
So let's assume that you want to buy shares of Ford. How do you do that? First, you'll need to know how to open an online brokerage account and how to buy a stock. (Those links will take you to helpful guides that will explain everything you need to know.)
Once you've got a clear understanding of how to make the transaction happen, the next step will be to make sure you understand Ford's business and outlook before you buy the stock.
Ford Motor Company in 2017: Change is in the air
Even the most pessimistic analysts will tell you that Ford is in much better shape today than it was when Alan Mulally took over as CEO back in 2006. Ford was a money-losing mess back then; today, it's solidly profitable, with low debt and an investment-grade balance sheet.
But it could be doing better. Realizing that, Ford's board of directors ushered Mulally's hand-picked successor, Mark Fields, into early retirement back in May. His replacement, Jim Hackett, is the former CEO of Steelcase, who took that company through a high-tech-savvy transformation. His mission now: to accelerate Ford's transformation into a high-tech-savvy mobility company, one that can thrive and profit amid changes coming to the industry from new technologies like self-driving cars.
Hackett hasn't shown us the details of his plan yet. But we know he has already started to streamline and speed up Ford's decision-making processes, to accelerate profit-boosting changes to Ford's vehicle lineup and product-development programs, and to accelerate its efforts to develop advanced technologies both on its own and with key partners.
If it works, Ford will have a foot in the current world of making and selling popular cars, trucks, and SUVs, and another foot in the new world of autonomous vehicles and shared mobility -- with strong profit margins and happy customers on both sides.
Will it work? It's early days, but the chances look good. Hackett is unproven as an automotive CEO, but he's a thoughtful, well-regarded leader with an excellent track record, and the changes he's made to Ford's senior management structure have put some of the company's most talented veterans in key positions.
Meanwhile, there are several reasons to like Ford as an investment right now.
Ford today looks like a good value
Looking beyond the potential future-growth story, there are some other reasons to consider investing in Ford today:
- The stock is fairly cheap. Despite the fact that Ford is solidly profitable, with low debt, good management, and a hefty cash reserve to see it through the next downturn, it's trading at about 7.9 times its expected 2017 earnings. Even for an old automaker, that's cheap.
- It pays a strong dividend. Ford's dividend is actually fairly conservative, in the sense that it's set at an amount the company thinks it can sustain through a recession. But because Ford's valuation is low, its current dividend yield is quite high, at about 4.9%. That's a return that you'll collect even if the stock stays stuck in the doldrums for a while.
Ford today isn't anything like the dramatic turnaround story it was several years ago. But we could argue that a small turnaround is set to unfold -- or at least, a change in course that has a good chance of boosting its bottom line over the next several years. Meanwhile, it's healthy and profitable, and in the hands of a great management team.
It might take a while for the stock price to follow the story, but an investor who buys now and reinvests that dividend while staying patient could be very happy with the results several years from now.